Nominal vs Effective Interest Rate: What's Actually Happening

In this video, we will explore the difference between the effective interest rate and nominal interest rate, which is crucial in finance. Understanding the nominal rate versus the actual return with compound interest, especially the effective annual rate, helps in financial arithmetic. Grasp these concepts to make informed decisions about interest rates. Nominal interest rates are also called annual percentage rate or APR. The nominal rate is the rate without considering compounding. The effective annual rate or EAR is the actual rate of return including compounding. Two examples: 1 effective annual rate with annual compounding 2 effective annual rate with quarterly compounding __________ SEE ALSO Accounting Equation https://finallylearn.com/accounting-equation/ The Ultimate Guide to Learn Accounting: https://finallylearn.com/ultimate-guide-to-learn-accounting/ Accounting Basics playlist https://www.youtube.com/playlist?list=PLfGIgQ5MF87DrepmHc7XikT8u2CnuP1HG __________ LEARN MORE Please Like, Comment, and Subscribe to support our channel. ✅ Please Subscribe to Finally Learn https://www.youtube.com/finallylearn?sub_confirmation=1 Visit Finally Learn: https://finallylearn.com/ ACCOUNTING BASICS The Ultimate Guide to Learn Financial Accounting https://finallylearn.com/ultimate-guide-to-learn-financial-accounting/ Accounting Basics Course for Beginners playlist https://www.youtube.com/playlist?list=PLfGIgQ5MF87DrepmHc7XikT8u2CnuP1HG EXCEL BASICS The Ultimate Guide to Learn Excel Basics https://finallylearn.com/ultimate-guide-to-learn-excel-basics/ Excel Basics playlist: https://www.youtube.com/playlist?list=PLfGIgQ5MF87CVfTFtLRUXmmpCQRMkLHLL Time Value of Money Playlist: https://youtube.com/playlist?list=PLfGIgQ5MF87AxKStl_GhqJwSCrlC5cMvG Data Analysis With Excel Playlist: https://youtube.com/playlist?list=PLfGIgQ5MF87BO2ScuNUv38qXAPhxSZLz1 FINANCE BASICS Time Value of Money Playlist: https://youtube.com/playlist?list=PLfGIgQ5MF87AxKStl_GhqJwSCrlC5cMvG INTERMEDIATE ACCOUNTING Intermediate Accounting Study Guide https://finallylearn.com/intermediate-accounting-study-guide/ Intermediate Accounting 1 Playlist: https://youtube.com/playlist?list=PLfGIgQ5MF87Ai2bWa1sTxIDRPqr6eNI4s Intermediate Accounting 2 Playlist: https://youtube.com/playlist?list=PLfGIgQ5MF87ATzNtzfgL0bSim8oh_CJ1t __________ BOOKS I RECOMMEND 📕 The Little Book of Common Sense Investing (Jack Bogle is the father of index fund investing) https://amzn.to/3cOIHi2 📗 A Random Walk Down Wall Street (Burton Malkiel's book on why index funds beat the investing pros) https://amzn.to/3mt6OpX 📘 The Boglehead's Guide to the Three-Fund Portfolio (Simplifying your portfolio with just three funds) https://amzn.to/3cOeEas __________ SAY HI ON SOCIAL 🖥 Website: https://www.finallylearn.com 🖥 YouTube: https://www.youtube.com/finallylearn __________ MY GEAR 🎙 My Favorite USB Microphone https://amzn.to/39Dd7Sm 💼 Laptop Backpack https://amzn.to/2OnqkHI 💵 The best Financial Calculator https://amzn.to/3duFvY0 📓 Favorite Journal https://amzn.to/3f4jrUX 🖊 Best Pens https://amzn.to/3tBHCiY __________ ABOUT ME My name is Jeff Mankin. I teach accounting, finance, and Excel. I started my website FinallyLearn.com and my channel to teach more people financial topics. I have a passion for teaching financial topics using Excel. I have articles and videos on many financial topics. My goal is to help you finally learn financial skills! Check out the playlists on accounting basics, time value of money, and Intermediate Accounting. I hope you join me on the Finally Learn channel! __________ DISCLAIMERS & DISCLOSURES This content is for education and entertainment purposes only. Finally Learn LLC does not provide accounting, tax, financial planning, or investment advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal. This description contains affiliate links that allow you to find the items mentioned in this video and support the channel at no cost to you. Finally Learn is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to www.amazon.com. Thank you for your support! #finallylearn #jeffmankin 7,919 Subscribers 10/20/2025 https://youtu.be/MSA7fsci4sk